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Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia

Author

Listed:
  • Abdul Khaliq

    (Department of Economics, Andalas University, Indonesia)

  • Ilan Noy

    () (Department of Economics, University of Hawaii at Manoa)

Abstract

The paper investigates the impact of foreign direct investment (FDI) on economic growth using detailed sectoral data for FDI inflows to Indonesia over the period 1997-2006. In the aggregate level, FDI is observed to have a positive effect on economic growth. However, when accounting for the different average growth performance across sectors, the beneficial impact of FDI is no longer apparent. When examining different impacts across sectors, estimation results show that the composition of FDI matters for its effect on economic growth with very few sectors showing positive impact of FDI and one sector even showing a robust negative impact of FDI inflows (mining and quarrying). The sectors examined are: farm food crops, livestock product, forestry, fishery, mining and quarrying, non-oil and gas industry, electricity, gas and water, construction, retail and wholesale trade, hotels and restaurant, transport and communications, and other private and services sectors.

Suggested Citation

  • Abdul Khaliq & Ilan Noy, 2007. "Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia," Working Papers 200726, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:200726
    as

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_07-26.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Foreign direct investment; economic growth; Indonesia;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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